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Case 1:11-cv-00632-JMS-RLP Document 30 Filed 03/29/12 Page 1 of 14 PagelD #:669

IN THE UNITED STATES DISTRICT COURTFOR THE DISTRICT OF HAWAIl

LEIGAFOALIl TAFUEWILLIAMS,ka LEIGAFOALIl TAFUEKOEHNEN; PAPU CHRISTOPHERWILLIAMS; REAL TIMERESOLUTIONS, INC.; CAROLYNRUTHKOEHNEN, AS TRUSTEE OFTHE CAROLYN R. KOEHNENREVOCABLE LIVING TRUST U/A,DATED APRIL 14, 1986; and JOHNDOES 1-5,

CIVIL NO. 11-00632 JMSIRLPORDER GRANTINGDEFENDANTS WILLIAMSES'MOTION TO DISMISSCOMPLAINT FILED 10/20/11,DOC. NO. 13Plaintiff,

Defendants.

vs.

DEUTSCHE BANKNATIONAL )TRUST COMPANY, AS TRUSTEE )MORGAN STANLEY ABS CAPITAL )I INC. TRUST 2007-NC1 MORTGAGE)PASS-THROUGH CERTIFICATES, )SERIES 2007-NC1, )))))))))))))

)))))- - - - - - - - - - - - )

ORDER GRANTING DEFENDANTS WILLIAMSES' MOTION TODISMISS COMPLAINT FILED 10/20/11,DOC. NO. 13I. INTRODUCTION

On October 20,2011, PlaintiffDeutsche BankNational TrustCompany, as Trustee Morgan Stanley ABS Capital I Inc. Trust 2007-NC1Mortgage Pass-Through Certificates, Series 2007-NC 1 ("Plaintiff' or "Deutschewww

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Bank") filed this foreclosure action against Leigafoalii Tafue Williams, fkaLeigafoalii Tafue Koehnen ("Lei Williams") and Papu Christopher Williams("PapuWilliams") (collectively, the "Williamses"); Real Time Resolutions, Inc.("Real Time"); and Carolyn Ruth Koehnen, as Trustee of the Carolyn R. KoehnenRevocable Living TrustUIA, dated April 14, 1986 ("Koehnen"). Plaintiffassertsthat it is holder of a Mortgage and Note on real property located at 45 Lama Street,Hilo, Hawaii 96720 (the "subject property") and that Lei Williams, the mortgagor,defaulted such that Plaintiff is entitled to foreclose.

Currently before the court is the Williamses' Motion to Dismisspursuant to Federal Rule ofCivil Procedure 12(b)(1), in which they argue, amongother things, l that Plaintiff has no standing to foreclose because it has notestablished that it was validly assigned the Mortgage and Note. Based on thefollowing, the court agrees that Plaintiffhas not established its standing toforeclose and therefore GRANTS the Williamses' Motion to Dismiss.III

III

III

1 Because the court finds that Plaintiffhas failed to establish its standing to bring thisaction, the court need not reach the Williamses' other arguments for dismissal.

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II. BACKGROUNDA. Factual Background

As alleged in the Complaint, on August 17, 2006, Lei Williamsentered into a mortgage transaction with Home 123 Corporation ("Home 123") for$280,000, secured by the subject property.2 CompI. ,-r,-r 10-11. Although themortgage requires the lender's written consent prior to the transfer of any legal orbeneficial interest in the subject property, on October 31,2007 Lei Williamsconveyed the subject property to herself and Papu Williams as tenants by theentirety without written notice to the lender. Id.,-r,-r 12-13.

The Complaint asserts that by instrument dated January 13,2009 andrecorded in the State ofHawaii Bureau ofConveyances on January 21, 2009, theMortgage and Note were assigned from Home 123 to Plaintiff. See id. ,-r 14;CompI. Ex. 4. Lei Williams has allegedly failed to pay the Note in accordancewith its terms, resulting in her owing $358,409.37 as ofOctober 1,2011. CompI.,-r19. Plaintifftherefore asserts that it is entitled to foreclose on the Mortgage and, ifappropriate, obtain a deficiency judgment. Id. ,-r 21. Plaintiff further asserts thatLei Williams' transfer of the subject property to Papu Williams and herself as

2 According to the Complaint, Real Time and Koehnen are second and third mortgageholders, respectively. See Compi. ~ 5-6.3www

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tenants by the entirety was fraudulent and should be voided to the extent necessaryto satisfy the amounts due and owing under the Mortgage and Note. Id.,-r,-r 25-27.B. Procedural Background

On October 20,2011, Plaintifffiled this action asserting claims forbreach of contract and fraudulent transfer.

On December 19, 2011, the Williamses filed their Motion to Dismisspursuant to Rule 12(b)(1). Plaintifffiled an Opposition on February 13,2012, andthe Williamses filed a Reply on February 7,2012. A hearing was held on March27,2012.

III. STANDARD OF REVIEWFederal Rule ofCivil Procedure 12(b)(1) authorizes a court to dismiss

claims over which it lacks proper subject matter jurisdiction.A Rule 12(b)(1) jurisdictional attack is either facial (attacking the

sufficiency of the complaint's allegations to invoke federal jurisdiction) or factual(disputing the truth of the allegations of the complaint). Safe Air for Everyone v.Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). In a factual attack "[w]here thejurisdictional issue is separable from the merits of the case, the judge may considerthe evidence presented with respect to the jurisdictional issue and rule on thatissue, resolving factual disputes ifnecessary." Thornhill Publ'g Co., Inc. v. Gen.

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Tel. & Elecs. Corp., 594 F.2d 730, 733 (9th Cir. 1979). In such case, "nopresumptive truthfulness attaches to plaintiff s allegations, and the existence ofdisputed material facts will not preclude the trial court from evaluating for itself'the existence of subject matter jurisdiction. Id.

Where, however,the jurisdictional issue and substantive issues are sointertwined that the question ofjurisdiction is dependenton the resolution of factual issues going to the merits, thejurisdictional determination should await a determinationof the relevant facts on either a motion going to themerits or at trial.

Augustine v. United States, 704 F.2d 1074, 1077 (9th Cir. 1983). Where "thejurisdictional issue and substantive claims are so intertwined that resolution of thejurisdictional question is dependent on factual issues going to the merits, thedistrict court should employ the standard applicable to a motion for summaryjudgment." Autery v. United States, 424 F.3d 944,956 (9th Cir. 2005) (quotingRosales v. United States, 824 F.2d 799, 803 (9th Cir. 1987)); see also Augustine,704 F.2d at 1077; Careau Grp. v. UnitedFarm Workers, 940 F.2d 1291, 1293 (9thCir. 1991). "The Court 'must therefore determine, viewing the evidence in the

light most favorable to the nonmoving party, whether there are any genuine issuesofmaterial fact . . . . '" Autery, 424 F.3d at 956 (quoting Suzuki Motor Corp. v.Consumers Union ofus., Inc., 330 F.3d 1110, 1131 (9th Cir. 2003) (en bane));

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see also Roberts v. Corrothers, 812 F.2d 1173, 1777 (9th Cir. 1987) ("In such acase, the district court assumes the truth of allegations in a complaint or habeaspetition, unless controverted by undisputed facts in the record.").

IV. DISCUSSION

Standing is a requirement grounded in Article III of the United StatesConstitution, and a defect in standing cannot be waived by the parties. Chapman v.Pier 1 Imports (US.) Inc., 631 F.3d 939,954 (9th Cir. 2011). A litigant must haveboth constitutional standing and prudential standing for a federal court to exercisejurisdiction over the case. Elk Grove Unified Sch. Dist. v. Newdow, 542 U.S. 1, 11(2004). Constitutional standing requires the plaintiffto "show that the conduct ofwhich he complains has caused him to suffer an 'injury in fact' that a favorablejudgment will redress." Id. at 12. In comparison, "prudential standingencompasses the general prohibition on a litigant's raising another person's legalrights." Id. (citation and quotation signals omitted); see also Oregon v. LegalServs. Corp., 552 F.3d 965, 971 (9th Cir. 2009).

The Williamses factually attack Plaintiff s prudential standing toforeclose, arguing that there is no evidence establishing that Plaintiffwas validlyassigned the Mortgage and Note on the subject property. The issue ofwhetherPlaintiffwas validly assigned the Mortgage and Note is inextricably intertwined

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with the merits of the Plaintiffs claims seeking to foreclose on the subject property-- that is, Plaintiffmust prove that it was assigned the Mortgage and Note before ithas the ability to foreclose. As a result, the court determines whether the evidencepresented, viewed in a light most favorable to Plaintiff, establishes a genuine issueofmaterial fact that Plaintiffwas validly assigned the Mortgage and Note. SeeAutery, 424 F.3d at 956.

The basis ofPlaintiffs standing to foreclose on the subject property(at least as alleged in the Complaint) is a January 13,2009 assignment of theMortgage and Note from Home 123 to Plaintiff. The assignment, attached to theComplaint, provides:

This Assignment, made this 13th day of January,2009, by and between Home 123 Corporation, aCalifornia corporation, hereinafter called the "Assignor",and Deutsche Bank National Trust Company, as trusteefor Morgan Stanley ABS Capital I Inc., MSAC 2007NC1, whose principal place ofbusiness and post officeaddress is c/o Saxon Mortgage Services, Inc., 4708Mercantile Dr. N., Forth Worth TX 76137-3605,hereinafter called the "Assignee."WITNESSETH:In consideration of the sum ofONE DOLLAR($1.00) and other valuable consideration paid by theAssignee, the receipt ofwhich is hereby acknowledged,the Assignor does hereby, without recourse, sell, assign,transfer, set over and deliver unto the Assignee, itssuccessors and assigns, the mortgage and note hereinafterdescribed . . . .

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CompI. Ex. 4.The Williamses argue that this assignment cannot be valid because

Home 123 was in bankruptcy liquidation as of January 13,2009. Specifically,Home 123 filed for Chapter 11 bankruptcy in 2007, Home 123 filed a liquidationplan in March 2008, and the bankruptcy court confirmed the liquidation plan inJuly 2008. In re New Century TRS Holdings, Inc., 407 B.R. 576, 579-80 (Bankr.D. Del. 2009). Effective August 1, 2008, the liquidation plan:

was created with AlanM. Jacobs as trustee. Also on thatdate, the Creditors' Committee was dissolved; the PlanAdvisory Committee (the "PAC") was formed; debtors'officers and directors ceased serving and were replacedby Jacobs; debtors' assets were distributed to theliquidating trust; and NCFC's outstanding common andpreferred stock, as well as all notes, securities, andindentures, were cancelled.

Id. at 585-86 (citations omitted). Given this liquidation, it appears that Home 123could not have validly assigned the Mortgage and Note to Plaintiff on January 13,2009. And in Opposition, Plaintiffpresents no evidence (or even argument)explaining how this January 13,2009 assignment is valid despite Home 123 'sbankruptcy and liquidation. In fact, Plaintiff argues -- without factual support --that NC Capital Corporation ("NC Capital") first bought the Note from Home 123and Plaintiff subsequently received it through a securitized trust. See PI. 's Opp'nat 20. And at the hearing, Plaintiff's counsel inexplicably stated that discovery is

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required to deternrine the Note's assignment, even though all facts concerning anyvalid assignment should certainly be known to Plaintiffwithout having to conductdiscovery. In other words, even Plaintiff, who is master of its Complaint and by allaccounts should know the basis of its claims, apparently disclaims the allegationsin the Complaint and at this time cannot establish its legal right to enforce theMortgage andNote.

The Complaint's assertion that Plaintiffobtained the Mortgage andNote through the January 13,2009 assignment is further called into doubt by thefact that Plaintiff brings this action as "Trustee Morgan Stanley ABS Capital I Inc.Trust 2007-NCI Mortgage Pass-Through Certificates, Series 2007-NC-I"--suggesting (as Plaintiffnow argues) that Plaintiffmay have received the Mortgageand/or Note through a Pooling and Servicing Agreement ("PSA") in 2007. Fromthe evidence presented by the Williamses (Plaintiffpresented no evidence onstanding in Opposition), Home 123 generally sold mortgages to its affiliate NCCapital, who then resold the mortgages for inclusion into securitized trusts. SeeWilliamses' Ex. Gat 4,-r,-r 9, 11. And NC Capital and Morgan Stanley ABSCapital I Inc., with Plaintiffas trustee, entered into a PSA dated January 1, 2007.See Williamses' Ex. U. The PSA requires NC Capital to deliver to Plaintiffassignments ofmortgage for each mortgage loan, and for Plaintiff to certify

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"receipt of a Mortgage Note and Assignment ofMortgage for each applicableMortgage Loan." Id. at 41-42.

This evidence presents two problems for Plaintiff. First, ifPlaintiffdid indeed obtain the Mortgage andNote through a 2007 PSA, then the 2007 PSAis yet another reason why the January 13,2009 assignment is a nullity and theComplaint's assertion that Plaintiffobtained the Mortgage and Note from Home123 is untrue. Second, the evidence presented does not actually establish thatPlaintiff received the Mortgage and Note through the PSA -- there is no evidenceon the record establishing what mortgages were included in the PSA. Thus,although Plaintiffmight have obtained the Mortgage and Note through this PSA,there is no evidence showing or even suggesting that this is indeed the case. As aresult, there is no evidence -- at least on the record presented before the court --creating a genuine issue ofmaterial fact that Plaintiffwas assigned the Mortgageand Note on which it now seeks to foreclose.

In opposition, Plaintiff argues that the Williamses are not parties orbeneficiaries to the assignment such that they cannot challenge it. In making thisargument, Plaintiff relies on caselaw from this court rejecting that aplaintiff/mortgagee can assert claims raising assignment irregularities and/ornoncompliance with a PSA. See Fed. Nat'! Mortg. Ass'n v. Kamakau, 2012 WL

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622169, at *3-4 (D. Haw. Feb. 23, 2012) (relying on Velasco v. Sec. Nat'l Mortg.Co., --- F. Supp. 2d ----, 2011 WL 4899935, at *4 (D. Haw. Oct. 14,2011), toreject "slander of title" claim challenging assignment of the note and mortgagebecause where the borrower is not a party or intended beneficiary of theassignment, he cannot dispute the validity of the assignment); Abubo v. Bank ofNew YorkMellon, 2011 WL 6011787, at *8 (D. Haw. Nov. 30,2011) (rejectingclaim asserting violation of a PSA because a third party lacks standing to raise aviolation of a PSA and noncompliance with terms of a PSA is irrelevant to thevalidity of the assignment).

Plaintiffs argument confuses a borrower's, as opposed to alender's, standing to raise affirmative claims. In Williams v. Rickard, 2011 WL2116995, at *5 (D. Haw. May 25,2011), -- which involved the same parties in thisaction and in which Lei Williams asserted affirmative claims against DeutscheBank -- ChiefJudge Susan Oki Mollway explained the difference between the two:

[Lei Williams is] confused about the doctrine of legalstanding. [Lei Williams] believers] that, becauseDeutsche Bank and Real Time have not proven that theyhave standing to enforce the loan documents, they lackstanding to seek summary judgment on the affirmativeclaims asserted against them. HadDeutscheBank orReal Time filed affirmative claims to enforce the notesandmortgages, they would have had to establish theirlegal right to enforce those documents. However,Williams has sued Deutsche Bank and Real Time, and

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the banks are merely seeking a determination that theyare not liable to Williams for the claims Williams assertsagainst them. The banks need not establish that they arethe legal owners ofWilliams's loans before they defendagainst Williams's claims. "Standing" is a plaintiff'srequirement, and Williams misconstrues the concept inarguing that Defendants must establish "standing" todefend themselves.

(emphasis added). In this action, the proverbial shoe is on the other foot --Deutsche Bank asserts affirmative claims against the Williamses seeking to enforcethe Mortgage and Note, and therefore must establish its legal right (i.e., standing)to do so. See, e.g., IndyMac Bank v. Miguel, 117 Haw. 506, 513, 184 P.3d 821,828 (Haw. App. 2008) (explaining that for standing, a mortgagee must have "asufficient interest in the Mortgage to have suffered an injury from [themortgagor's] default"). As explained above, Deutsche Bank has failed to do so.

The court therefore GRANTS the Williamses' Motion to Dismiss.This dismissal is without prejudice. See Ramming v. United States,

281 F.3d 158, 161 (5th Cir. 2001) ("The court's dismissal ofa plaintiff's casebecause the plaintiff lacks subject matter jurisdiction is not a determination of themerits and does not prevent the plaintiff from pursuing a claim in a court that doeshave proper jurisdiction."); Frigard v. United States, 862 F.2d 201,204 (9th Cir.1988) ("Ordinarily, a case dismissed for lack of subject matter jurisdiction shouldbe dismissed without prejudice so that a plaintiffmay reassert his claims in a

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competent court."). Although the court considered materials outside of theComplaint and applied the summary judgment standard in determining whetherPlaintiff had established its standing, the Williamses brought a Motion to Dismissfor lack of subject matter jurisdiction and not a motion for summary judgment. SeeAtkins v. Louisville andNashville R. Co., 819 F.2d 644,647 (6th Cir. 1987)(stating that even where the court considered materials outside the pleadings, itmade clear that dismissal was without prejudice and did not contemplate theentering of summary judgment); Thompson v. United States, 291 F.2d 67,68 (lOthCir. 1961) ("A motion for summary judgment lies whenever there is no genuineissue as to any material fact. It is not a substitute for a motion to dismiss for wantofjurisdiction."). Thus, this dismissal does not prevent Plaintifffrom performingdue diligence (as it should have done before filing the instant Complaint) todetermine whether and how it validly received the Mortgage and Note and bringinga new action seeking foreclosure.III

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v. CONCLUSIONBased on the above, the court GRANTS the Williamses' Motion to

Dismiss. The court DISMISSES the Complaint without prejudice. The Clerk ofCourt is directed to close the case file.

IT IS SO ORDERED.DATED: Honolulu, Hawaii, March 29,2012.

/s/ J. Michael Seabright1. Michael SeabrightUnited States District Judge

Deutsche BankNat 'I Trust Co., as Trustee Morgan Stanley ABS Capital I Inc. Trust 2007-NClMortg. Pass-Through Certificates, Series 2007-NC-l v. Williams et ai., Civ. No. 11-00632JMSIRLP, Order Granting Defendants Williamses' Motion to Dismiss Complaint Filed 10/20111,Doc. No. 13

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